Poland's new Minister for the State Treasury, who controls all the State owned energy companies, has been putting intense pressure on their senior managements (some have already been fired "pour encourager les autres") to get shale gas drilling and exploitation "moving". That includes also pressure on the State electricity generators to get involved who should, in fact, be concentrating on renewing/building new power stations and not drilling for gas which is not in their statutory remit.

The problem all those companies have is a general shortage of investment capital associated with their responsibility towards shareholders (all are listed on the Warsaw Stock Echange). How will they justify to their shareholders the risk of "dry wells" at a minimum 15-50 million USD each which is essentially monies thrown away? Under the Polish Law Code dating back to communist times, company directors are held personally liable for company losses, indeed they can be arrested and charged as criminals for taking "risky business decisions" and thereby "losing company monies", whatever that may mean (its all subject to individual interpretation by State Public Prosecutors who are keen on making names for themselves). No wonder that the State owned energy company managements want to stick to "safe business" and avoid like the plague "unnecessarily risky decisions".

Thus, Poland is totally dependent on foreign owned gas drilling companies who can fund exploration wells from their own non-Polish capital and have the necessary technical expertise, mostly from the USA and Canada. As for exploitation licences, they will have to be bid for in public tenders as in other countries in the EU and subject to a mining royalties tax. The Polish companies will then be able to act as subcontractors and focus on the construction of pipeline distribution networks as well as becoming endusers.

Mike, it is indeed well nutty in the first place to leave a national project largely reliant on capital-market if the Poles are really thinking of the shale gas development as a national project.

In case of the US shale gas development, there can be only two ways to view it:
1. It is not considered as a national project.
2. The Americans adopt corporatism in all that they regard as national projects.

I bet on the latter, ma.

Then, I wonder if the Poles could ever follow what I think of the method of corporatism at home. Actually, I am quite doubtful. Poland’s private sector has been unsuccessful in forming a corporatist socioeconomic structure even to buy back their banks, much less to invest massively into shale gas projects.

There may still be a way of depending less on capital-market. That is what I suggested in my post dated Jan 17th 2012 5:18 GMT.

The company identified as corrupting State officials, Petrolinvest, is a Polish private company owned and controlled directly and indirectly by Mr R.Krauze, a Polish businessman and (former) oligarch who initially made his monies as a communist state security officer operating in Germany and then used his political contacts both on the left and right of the political spectrum (he was very pally with Presidents A.Kwasniewski and L. Kaczynski) in the 19990's-2007 to create a series of grossly over-leveraged businesses, most of which have subsequently collapsed. His standard business method of gaining "influence through greasing hands" is well known. If the corruption is proven then he can kiss goodbye to getting exploitation licences in the long term and to his exploration licences in the short term as they will be confiscated.

R. Krauze has always tried to be pally with everyone in power. It should be noted that he was the indirect cause for the collapse of the Law and Justice coalition government by tipping off the late Andrzej Lepper (then minister of agriculture) about an anti corruption bureau (CBA) crack down on the illegal re-qualifying of agricultural land for development (Afera Gruntowa). It should also be noted that CBA was the brain child of Law and Justice MP Mariusz Kaminski, an organisation specifically assigned to rooting out corruption among those in power, regardless of political affiliation.

A cynic would say the Law and Justice shot itself in the foot, but how else can you root out corruption among those holding positions of power? Kamiński's CBA inevitably led to the collapse of Jarosław Kaczyński's government, but neither of the Kaczyński twins ever held it against him.

Some years later, however, when the CBA uncovered another major corruption scandal, involving collaboration between leading members of Civic Platform, including the sports minister and party treasurer Mirosław Dzewiecki, and a gambling mafia lobby (Afera Hazardowa), Tusk was not so understanding and sacked Mariusz Kamiński. CBA is now effectively neutered.

As for Mr Krauze, well, when Law and Justice were still in power he fled the country. But when Donald Tusk's government took over, he immediately returned. I don't know why Mike calls him a "former oligarch"? All charges against him were swept under the carpet, and there's no reason to feel confident he'll cease amassing wealth by pretty much the same means as he has done since communist times - not with governments like those of Tusk.

This is just apropos the rather snide and misleading remark about Krauze being pally with the late president of Poland, Lech Kaczyński. I remember how this point was laboured beyond all common sense by the oh so unbiased press at the time of Afera Gruntowa. It is even more of an unjustified insinuation now, after Lech Kaczyński's tragic death. Because one might not agree with his political views, but it is ridiculous to suggest he was ever corrupt.

The Polish authorities have been giving out shale gas exploration licences. These however, are not exploitation licences. The latter will only be sold once shale gas reserves are identified and quantified. All underground resources in Poland are State property. Thus owners of land parcels where extraction may eventually take place will not be compensated on the American model.

Given that Poland does not have the necessary experience or resources to carry out detailed exporation of potential shale gas reserves, the current policy of cheaply selling exploration licences is the correct one as it does not give the explorers exploitation rights. Once gas reserves are identified and quantified then the new law on mineral exploitation will come into play: companes will have to pay mining fees to the Polish State.

As to corruption in obtaining licences, some companies are under the impression that they are gaining exploitation licences. If so, they have been taken for a ride! The Poles are very nervous about Russian companies getting in through the back door: its bad enough that the country is dependent for 2/3rds of its current gas supplies on the monopolistic Gazprom. If local resources will be under Russian direct or indirect (through a series of subsidiaries) control then attempts to achieve energy indeependence will be frustrated. Fortunately, by 2014 the LNG terminal port will be open near Szczecin and gas pipeline interconnectors are being rapidly built/opened to the German, Czech and Slovak systems.

As for nuclear power generation, someone was citing Japan and Germany. Japan’s anti-nuclear movement after the Fukushima incident is not a long-term trend. Although the fear among mothers is understandable as the Ambassador of Poland to Japan Dr Jadwiga Rodowicz has recently pointed out, it has rather gone to be a mass hysteria and thus full of too radical and unreal claims, combined with some rather explicit conspiracies by its neighbouring economies that have been trying to outweigh Japan. Germany can easily avoid the type of energy starvation Japan is suffering because it can increase its import of electric power from its neighbouring countries.

Poland should walk its own right path. Think of improving public audit if you can’t trust Mr Tusk, rather than abusing him. You have the right to not trust him, but there are better ways to improve Poland than personal attack.

"Think of improving public audit if you can’t trust Mr Tusk, rather than abusing him."

"Improving the public audit" has been a number-one priority of Tusk's government for the last 5 years with the full support of the mainstream media, both at home and abroad, as well as various "apolitical" organisations both at home and abroad, so effectively you're saying: "let them eat cake!"

BTW, what do you think of the "public audit" with regard to Orban's government?

You said: "Japan is suffering because it can increase its import of electric power from its neighbouring countries."

I assume you meant to say "..it canNOT increase its imports..."

There is simply no comparison between Japan's and Poland's energy supply options and the energy demand. Japan is and will remain totally import dependent. With appropriate long term energy strategy Poland can free itself of import dependency except for refined oil products.

Japan has been building and operating nuclear power stations for decades while at the same time switching from expensive domestic coal to importing thermal coal from Australia, Canada, etc. Poland is way behind in getting valuable experience in building and operating nuclear power stations. Japan relies on the US for uranium enrichment and fuel reprocessing, Poland has the European Urenco facilities nearby.

As pointed out by Yura2009 has drilled test wells into methane hydrate deposits off Japan's southern coast expecting to start extracting limited gas quantities this year. But even with an optimistic forecast that source would not meet Japan's energy needs for decades.

By the way, I only wish the Poles (and Ukrainians) noticed not only the latest nuclear power plants but also the latest coal fire power plant that J-Power is running in the Isogo ward of the city of Yokohama. The coal fire power plant is the real innovation.

It is 'can' actually, and not 'cannot'. It was not a typo. Me at Jan 20th 2012 4:51 GMT was a fool. The subject of the 'can' in question is not Japan but Germany. It is Germany that can increase its import of electric power from its neighbouring countries.

Still, I wish the Poles (and Ukrainians) to get informed about the Isogo power plant.

It is much better to introduce a mild levy into each business field and steepen the schedule of marginal tax rates for households at the same time.

The grand purpose for developing the shale gas industry ought to be to eventually develop the structure of fixed capital at home that would be favourable to Poland’s long-term growth in view of improving the schedule of the marginal efficiency of capital (MEC). I am sceptical of introducing the taxation when the capital market at home that should improve the industries that should produce capital- and intermediate-goods as opposed to consumer-goods is still immature in Poland. Timing matters, that is.

This topic of argument is based on the premise that the shale gas exploring will be dependent on private investment. A heavy levy on shale gas would discourage investment into shale gas by that much unless those private investors find their businesses still lucrative enough in some way or other, because they would be more likely to expect the average capital cost in the business field to soar with the taxation. Capital-market participants could still find their businesses lucrative, because, if Poland wants to push shale gas on this condition, it would have to heavily import capital- and intermediate-goods necessary for developing the shale gas industry at home, as the structure of fixed capital at home would have been left immature. Combined with increasing shale gas exporting, this situation would aggravate the hollowing of the Polish industry along with the zloty becoming increasingly stronger than it otherwise should be, persistently marking current account deficits and making the capital market at home increasingly vulnerable to flows of international hot-money.

My answer is public ownership for the time being – for some decades. That is the scheme similar to the one for the Polish copper miner KGHM. KGHM is the state-owned joint-stock company paying dividends nicely to the government. The Polish government should establish state-owned joint-stock wholesalers that hold the exclusive privileges to purchase gas from wells, which will even be run by the majors such as Exxon and Shell, and distribute shale gas if PKN Orlen is indifferent to the job. The privatisation scheme in the future must be based on the idea introduced by John Quiggin in his 2009 book ‘Zombie Economics’ p.191-192.

The case of corruption described in the above entry has a misleading effect that government involvement is the hotbed of crony capitalism. It is not. To maintain enough transparency, it should put more attention to public audit rather than private ownership: This is the theme of the Chapter 24 of Keynes’ ‘General Theory’. Public audit is what was ‘systematically’ missing in the socialist and fascist blocs. Public audit doesn’t work sufficient in a market-liberal economy, because the object of the audit occupies too small a share of the aggregate investment within the economy. Actually, as we have found in the case of capital market liberalisation, privatisation is neither the way to avoid crony capitalism but otherwise nor the way to undertake a better allocation of investment than public involvement in view of the schedule of the MEC. Haphazard privatisation rather increased the aggregate investment in an economy than improved the schedule of the MEC of it, eventually leading it to a long period of stagnation.

Public ownership and progressive household taxation per se, however, are not sufficient but merely a necessary condition for the grand purpose. The government needs to use much of the marginal revenue, mostly through dividends for the time being, to the kinds of public investment that would improve the schedule of the MEC at home. The Dutch has shown a thought-provoking scheme through their process of recovering from the Dutch disease. They implemented public investment projects against the then aggravating urban sprawl and motorisation. Poland may as well follow the Dutch method more decidedly. The Polish version should require some extra methods against capital market liberalisation by adding a larger frictional resistance to the international and domestic capital flows unless it joins the euro area of the ‘fiscal’ union, union that has the system of income redistribution or capital reallocation between the member states. It is because it is the era well before the financial big-bang or the Washington Consensus that the Dutch launched the scheme.

(The income redistribution between the member states can be attained by fiscal integration whereas the income redistribution among the households in an economy should be attained mainly by public investment or jobs rather than by social welfare or allowances. The trickle-down theory, always attached with the infeasible notion of safety net, is a scam).

Little has been said so far about another huge energy resource found in vast amounts frozen into the sea bed potentialy exceeding the combined known reserves of natural gas and oil. Known as methane hydrate it has been regarded by oil and gas industry as a nuisance interfering with some conventinal drilling. Now, however, Norway's Statoil, itself a leading gas producer, is reportedly perfecting a method to brake down the sediments containing methane hydrate, releasing the gas which can then be collected, processed and piped.

Japan's JOGMEC Corp. has also been drilling test wells into methane hydrate deposits off Japan's southern coast expecting to start extracting limited quantities late this year. Projections may well be optimistic but some people consider these methane hydrade deposits large enough to provide Japan's total energy needs for decades to come.

Progress in such test drilling generates interests in other areas known to contain methane hydrates including off China's coast, in the Indian ocean and elsewhere. Naturally, Norway, the UK, Denmark and other countries are keen to speed up technology development needed to commercialise the process.

Obviously, such alternative gas sources as shale gas and methane hydrates have major implications for Russia's Gazprom's attempts to maintain and expand its near-monopoly on gas supply to Europe. The USA gas surpluses have cut back prices to less than half of those charged by Gazprom. With potential new gas supplies from shale and methane hydrate, in addition to LNG supplies from Africa and Middle-East, the economics of building and operating very expensive Russian gas pipelines all the way from the Central Siberian Arctic to the European markets may well become a curiosity of history books.

Once again it seems im at odds with public opinion. In my opinion it is not important who owns the gas, but rather what is important is who actually has the means and technology to exploit it. Many of the shale gas licences have gone to American firms because they have and have developed the technology that can actually use it. If Poland has large amounts of natural gas than that is good, but the fact nobody is willing to explore it speaks for itself. Americans have been exploiting shale gas and now pay significantly less for the gas out of their taps, and we are not talking 5 or 10% here but around 50% less.

Shale gas and nuclear energy is the future, regardless of whether you like it or not. If Poland has natural gas that is good too, but it is shale and nuclear that businesses and the government are willing to invest in, and either we support them or we will continue to import from Russia and our money, instead of going into our pockets, will go into theirs.

There are people reading this blog who know much more than me, but I should think ownership is everything. It's not just the gas, it's the pipelines, and all the other special licence agreements. When something is deep in the ground, it's everybody's and nobody's. Once it's above ground and useful, it's always somebody else's. No shortage of coal in Silesia, and yet there you have a phenomenon called "biedaszyby".

And what "American firms" are buying up these shale gas licences? Do you know? Because I don't. Besides, why hasn't Poland been exploiting its conventional gas reserves?

"Americans have been exploiting shale gas and now pay significantly less for the gas out of their taps, and we are not talking 5 or 10% here but around 50% less. "

Yes, and the big problem this (so-far) warm winter is what to do with the excess supply, as storage capacity is running out. More LNG plants would seem to be called for, but that won't solve this year's problem. There are worse problems to have, however.

"nobody is willing to explore it speaks for itself"
That's not true, it is explored right now. I know for sure, because I live close to the area. Polish company PGNIG explores it and I can tell they're moving fast.

Poland has 109 shale gas exploration licences, just to put that int perspective the UK has 1 such licence and the drilling done there has caused something of a mini earthquake. So all in all, despite these little bribes, the programme has so far been quiet successful. In my opinion any energy source that has the potential to make us energy independant of Russia is someting that is worth investing in. In such a big project there are bound to be obstacles and even if only a few of these sites carry high grade gas then it was a good investment since it was private companies who took on the costs. Its a win win situation for us.

Nuclear energy is another energy source that Poland should press fully ahead with as it is one of the safest, cleanest and most reliable energy suources out there, i for one am very gelous of the French in this respect.

Nuclear energy, coupled with shale has, coupled with coal should improve our situation and is a step in the right direction. Despite the comments on these blogs, many people in Poland are not very positive of wind turbines in the countryside, so for example the construction of a wind farm next to the town of Zdunska Wola in central Poland was recently blocked as people who lived there did not want wind turbines infront of their windows and claimed the noise may hurt their health. But despite this, there are dozend of wind farms being built in Poland every year.

All in all, it looks as energy generation in Poland is moving in the right direction.

@ChrisFrance: I am sure you know that Poland has always had enough conventional natural gas reserves and resources to have always been energy independent from Russia. (http://www.rp.pl/artykul/19423,438136_Polska_ma_swoj_gaz_.html) The current dependance of Poland on Russian gas supplies is not a result of a lack of potential of self-sufficiency for the last 30 years, but a result of the Polish government policies and actions designed to make Poland dependant on the Russian gas supplies. What follows is that Poland can become a huge producer of natural gas in the future. However it does not automatically imply that Poland will become energy independent as the key point will be who will control the production. If the current situation is anything to go by, e.g. Poland lost control over shale gas licensing, Yamal pipeline in Poland is not controlled by the state, it does not look particularly optimistic for Poland.

I read with a great deal of interest the www.rp.pl/artykul (in translation) on Poland's real and potential gas resources. I am impressed by the author's optimism about Poland's future as a potential gas supplier to Central Europe on the one hand and, on the other hand, struk by his sharp criticism of government's policies leading to the following conclusion (partial translation):

"Almost every government that came to power has announced that domestic gas production will be or should be, increased. Meanwhile, despite publicized conflicts with Russia, the real strategy of Polish gas supply from domestic sources is conducted as if it were written by the Russian supplier. So that Poland will always be on a short leash."

One would only hope that the present version of long term 'strategy' will avoid repeating past errors by hooking up Poland's distribution network to the 'North Stream' gas supply via indirect linkage to the German transmission network.

For comparison only, and certainly NOT as an example to follow in terms of planning electric capacity in Poland, the following data on Russia's present power production, including future projections, will be of interest.

In 2009 Russia's nuclear power production was 163.3 billion kWh (83.7 TWh from VVER, 79.6 TWh from RBMK (older reactor type). In 2010 nuclear power generation reached 170.1 billion kWh, 16.6% of Russia's total electrical output. Nuclear electricity output has risen strongly due to improved performance of nuclear plants, with capacity factors increasing from 76% in 1998-2003 to 80.2% in 2009. Rosenergoatom aims for 90% capacity factor by 2015. Nuclear output is projected to grow to 239 billion kWh in 2016 (18.6% of total). Nuclear generating capacity is planned to grow some 50% from 24.2 GWe gross (22.8 net) in 2010 to 35 GWe in 2016, and at least to 50 GWe by 2020.

In 2006 Rosatom announced a target of nuclear providing 23% of electricity by 2020 and 25% by 2030, but 2007 plans approved by the government have scaled this back a little.

Russia is also planning to increase its hydro-electric power capacity by 60% to 2020 and double it by 2030.

As to the gas-fired power stations, Gazprom has cut back natural gas supplies for electricity generation because its export gas prices are up to five times higher than domestic prices for Russian utilities. While Russia's gas-fired plants now consume about 60% of the gas marketed in Russia by Gazprom, it plans to halve this by 2020. By that time Russian Western Siberian gas fields are expected to be depleted to the point that they will supply only 10% of the current Russian output, compared with 75% now. And export prices for gas from new fields can be expected to be considerably higher.

If Poland is "a country caught up in flighty dreams of riches", why is Donald Tusk's government so eager to press ahead with a quite unnecessary and environmentally far more dangerous nuclear energy programme?

In fact Poland has more than one not-as-yet effectively exploited energy option, for instance, geothermal energy. But there is also more than one way of utilising coal reserves. So what's holding us back? Well, governments like those of Donald Tusk. Another problem is the foreign meddling through agents such as very business oriented, so-called "environmentalists". Take such governments and "environmentalists" out of the game, and perhaps there is a chance for a rational, sustainable and environmentally sensible way of providing energy for future generations.

Anyway, thanks for at last posting something about Poland, in recent weeks it seemed Eastern Approaches had an unhealthy Orban fixation.

France has the cheapest (pre-tax) electricity in Europe, the lowest carbon emissions in Europe, low particulate emissions in urban areas (thanks to electric rather than gas heating - by WHO figures, this adds more than a month to French life expectancy), and a perfect safety record.

And with current technology, safety standards are higher than they ever have been - and there has never yet been a serious accident

Do nuclear right, and it's far better for the economy, environment and human health than renewables are at present.

For these reasons, it is right that Tusk (and any Polish government) should pursue a large nuclear program for domestic electricity generation. And, for the short term, for industry and for export, it is right for the Polish economy that Fracking also be properly exploited.

If, in this mix, geothermal can be cost competitive, then it should (and will) be exploited. If the Polish government has surplus funds and if a project merits, then pilot plants should receive government subsidy. But for general power generation - and especially in a country with low per capita incomes - it is important to exploit the most cost competitive and economy building sources of energy. If future generations are far richer, and as the relative cost of renewable sources diminishes, they might vote for suffering the economic loss that comes with expensive renewables.

Yes, France's nuclear programme is very impressive (for the time being at least), but how many nuclear plants has France got? And how many nuclear power stations is Tusk's government planning to build? One. Is that cost effective? No. On the other hand, nuclear power is going out of fashion in other countries such as Germany and Japan, in the future there will be more nuclear waste, and their are emollient politicians all too willing to oblige for a relatively modest price.

Embarking on an extremely expensive nuclear energy investment programme is a complete waste of time in Poland. Geothermal energy on the other hand, could be implemented much sooner, and there are Polish private investors eager to invest capital. Pity Civic Platform hates Father Rydzyk so much.

France is desperate for customers for its latest (and fantastic) generation of reactors.

No new research necessary - just negotiate a good deal.

France also offers reprocessing to the entire European nuclear industry. Which means that the fuel going through new Polish reactors could be used several times before disposal. If Poland doesn't want to deal with the nuclear waste, Poland can easily arrange to use repositories in France or Finland. Or pay for Russia to take it... The easiest option would be an all inclusive French deal at a well negotiated price.

Naturally, costs would be contained further at greater scale - given more Polish reactors, perhaps given a new wave of French domestic investment, along with Hungary and a few other parts of Eastern Europe.

Germany has been screwed by confused greens (Germany is the most polluting country in Europe, partially thanks to the nuclear pull-out, partially because of massive coal subsidies that hypocritical the greens didn't bother to resist). Germany gets away with bad government and inefficiency because of phenomenally high private sector productivity. Poland doesn't have that luxury.

You wrote: "Embarking on an extremely expensive nuclear energy investment programme is a complete waste of time in Poland."

I am not a proponent of nuclear energy per se and I am quite aware about the long-standing debate over the safety of nuclear power stations and the issues of spent fuel reprocessing and so on. But, to be fair, one needs to admit that volumes have also been written about long term environmental hazards of burning coal for power generation as well as long term health hazards to thousands of miners who spend a large part of their adult life inhaling dirty coal dust. Poland's very heavy (90%) reliance on coal for power generation, inherited essentially from the communist era central planning, is not sustainable over the long term (despite ample coal resources) because of environmental and health reasons. Today's nuclear power technology is 'light years' ahead of the Soviet-type power stations that were built in Ukraine and Lithuania. If the country is ever to learn how to plan, build and operate nuclear stations, the time to start is now as it will take a decade or so before the first nuclear station becomes operational. Germany has its peculiar, but not necessarily justified, reasons for preferring to rely on coal. Despite the last regrettable accident caused by the 'mother nature', Japan has few viable energy options. It is not an example for Poland to follow.

As to your view that "Geothermal energy ... could be implemented much sooner" that may well be so except that no one has yet identified where are the resources capable of providing more than a token contribution to the overall growing energy demand. The same, of course, can be said about other renewable energy sources -solar, wind, etc. As to natural gas, - imported via pipelines or as LNG, - it should be seen as a vital energy source for home heating and for petrochemicals, not as fuel for burning in thermal power stations. But the bottom line is this: the sooner Poland reduces its excessive dependency on Russian gas the better.

Indeed, excessive dependency on Russian is an overriding concern. And, no, I in turn am not against nuclear energy per se. If you don't have other energy resources (e.g Japan) or if you're wealthy enough to embark on a comprehensive nuclear energy programme (e.g. France), it's to some extent perfectly rational. But Poland falls into neither of the above categories and what worries me is the specific nature of the current government's attitude to the general problem of energy. Like with almost everything, else there doesn't appear to be any long term strategy. It's all for show "here and now" as Tusk once inadvertently conceded.

Yes, the French can afford to turn their noses up at shale gas and are more than willing to sell their nuclear technology to other nations. Of course, they say it's "cheap", but that's because they're eager to sell, not because it's so cheap all things considered. And let's look at the other side. The construction of single nuclear power station is hardly going to solve anything. That's why I dared to make the comparison with geothermal energy.

Indeed the most sensible strategy is to diversify and to explore all options, including the most modern innovations. But that isn't what the current government has been doing. The scandalous way in which they negotiated with Gazprom, one would think Poland had no other options at all. Like with everything else, the current government is dragging its feet with legislation that would secure for Polish citizens the potential profits from shale gas. And wilfully harming Fr Rydzyk's geothermal project by depriving it of EU funds.

Generally speaking, Civic Platform hasn't been thinking about long term energy solutions at all, and then, all of a sudden it becomes very pro-nuclear. Forgive me for being so cynical, but Civic Platform does have a long track record. Why would they wish to invest in just one nuclear power station? And would it have anything to do with Germany pulling out of the nuclear programme?